Saudi Aramco to buy 70% stake in SABIC for $69 billion
29 March 2019
Saudi Aramco, the world’s largest oil refiner, has agreed to buy a 70 per cent stake in Saudi Basic Industries Corp (SABIC) from the kingdom’s wealth fund for $69.1 billion, in what would be the biggest deal in chemical industry.
Saudi Aramco on Wednesday said it acquired the 70 per cent majority stake in Saudi Basic Industries Corporation (SABIC) from the Public Investment Fund of Saudi Arabia, in a private transaction for SAR 259.125 billion ($69.1 billion) valuing SABIC at SAR 123.39 per share.
The remaining 30 per cent publicly traded shares in SABIC are not part of the transaction, and Saudi Aramco said it has no plans to acquire these remaining shares. The transaction is subject to certain closing conditions, including regulatory approvals.
The acquisition of SABIC will advance Saudi Aramco’s integrated refining and petrochemicals business, while providing SABIC with a strategic energy industry shareholder and expanded growth opportunities, a Saudi Aramco release stated.
With 17 and 62 million tonnes per annum, respectively, of current petrochemicals production capacity for Saudi Aramco and SABIC, the acquisition will help enhance competitiveness and address fast growing petrochemicals, Saudi Aramco said.
Headquartered in Riyadh, Saudi Arabia, SABIC has global operations in over 50 countries with 34,000 employees. In 2018, SABIC’s consolidated production volume across its various business units was 75 million metric tonnes, and recorded net income of $5.7 billion, annual sales of $45 billion, and total assets of $85 billion.
“This is a win-win-win transaction and a transformational deal for three of Saudi Arabia’s most important economic entities. It will unlock significant capital for PIF’s continued long-term investment strategy, underpinning sectoral and revenue diversification for Saudi Arabia. Furthermore, it will introduce a strategic owner that can add considerable value to SABIC and all its shareholders, while capitalizing on SABIC’s strong capabilities to unlock the opportunities for growth that Saudi Aramco, a key player in energy markets around the world, can offer,” Yasir Othman Al-Rumayyan, managing director, Public Investment Fund of Saudi Arabia, said.
“This transaction is a major step in accelerating Saudi Aramco’s transformative downstream growth strategy of integrated refining and petrochemicals. SABIC is a world-class company with an outstanding workforce and chemicals capabilities. As part of the Saudi Aramco family of companies, together we will create a stronger, more robust business to enhance competitiveness and help meet rising demand for energy and chemicals products needed by our customers around the world,” Amin Nasser, president and CEO, Saudi Aramco, said.
The acquisition is in line with Saudi Aramco’s long-term strategy to drive growth through an enhanced downstream portfolio by increasing global participated refining capacity from 4.9 million to 8-10 million barrels per day by 2030, of which 2-3 million barrels per day will be converted into petrochemical products. This Downstream portfolio will consume significant quantities of Arabian crude oil.